Tell Your FriendsLife-Income Gifts
Do you want to support America’s National Parks, but worry about having enough income for yourself and your loved ones? Life-income gifts, such as gift annuities, charitable remainder trusts, and charitable lead trusts, can provide donors with income, significant tax savings, and the satisfaction of supplying our parks with vital long-term resources.
The creation of life-income gifts provides mutual benefits to both giver and receiver. It’s a “win-win” situation.
Life-income gifts include:
The Charitable Remainder Trust
You create a trust, and income from the trust is paid to beneficiaries you specify. Beneficiaries receive income for life or for a specified number of years, and at the end of the trust term the assets of the trust pass to the National Park Foundation.
For example, George and Mary Carlson purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both aged 65, they would like to augment their retirement income. To do this, they transfer the stock to a charitable remainder unitrust with a 6% payout rate.
In the first year, they will receive a $6,000 paymentfour times the dividends they have been receiving, and those payments will increase in time if the assets of the unitrust appreciate in value. Moreover, they avoid tax on their profit in the stock and they receive an income-tax deduction of $29,391. In their 31% tax bracket, this saves them $9,111 in income taxes (31% of $29,391).
At the surivor’s death the unitrust assets will be distributed to the National Park Foundation.
Charitable Lead Trust
Through this arrangement, you can make gifts that provide a stream of income to the National Park Foundation for a period of years, with the principal amount of the gift reverting back to you, your children or grandchildren. This method of giving can provide for the passing of assets to loved ones at a reduced tax cost.
Remainder Interest in a Residence or Farm
You may give the property to the National Park Foundation while retaining the right to occupy the residence or operate the farm. Such a gift of a remainder interest provides an income-tax charitable deduction for the present value of the remainder interest that frees up tax dollars into spendable income without causing any disruption in the donor’s lifestyle. In addition, this plan permits you to escape any potential capital-gain tax on the built-in appreciation.
For example, Sally Holloway, 75 and recently widowed, has lived in her present home for 25 years and has no plans to move. To obtain present tax relief without altering her lifestyle, however, she gives her home to the National Park Foundation while retaining the right to live in the home for life.
At the time of the gift, the residence is appraised at $250,000. This gift arrangement will provide an income-tax charitable deduction of $113,608 (the value of the charity’s remainder interest). Since Sally’s tax bracket is 31%, her total tax savings will be $35,218 (31% of $113,608). This is the amount by which her income tax will be reduced over the period she reports the deduction.
In the event she decides to move in the future, she will have several options: rent the property and collect the rent, give her life interest in the home to the National Park Foundation in exchange for a stream of payments for life, or simply give her life interest outright and receive another deduction.
Charitable Gift Annuities:
In exchange for a transfer of cash, marketable securities, or, in some circumstances, real estate, the National Park Foundation contractually guarantees to pay a specified annuity to you and/or another beneficiary.
You can claim a current charitable deduction for the portion of the transfer that represents the charitable gift. And, a portion af each annuity payment may be free of income tax over the life expectancy of the annuitant. If appreciated assets are used, then only a portion of the capital gain must be recognized over the life expectancy of the donor.
For more information about how you can use life-income gifts to benefit the National Park Foundation, please contact NPF Development, at (202) 354-6460.
